Company Performance Per Share
The below ratios describe the value of shares of stock to stockholders, both in terms of dividends and their general ownership value:
- Earnings Per Share (EPS) is the amount of earnings per each outstanding share of a company's stock. Companies are required to report EPS for each of the major categories of the income statement, including: continuing operations, discontinued operations, extraordinary items, and net income. EPS = Net Income / Average Common Shares.
- Price to Earnings (P/E) ratio relates market price to earnings per share. The P/E ratio is a widely used metric used for measuring the relative value of companies. A higher P/E ratio means that investors are paying more for each unit of net income; therefore, the stock is more expensive compared to one with a lower P/E ratio. The P/E ratio also shows the number of years of earnings which would be required to pay back the purchase price—ignoring inflation, earnings growth and the time value of money. P/E Ratio = Market Price Per Share / Annual Earnings Per Share .
- Dividend Yield ratio shows the earnings distributed to stockholders related to the value of the stock, as calculated on a per-share basis. The dividend yield or the dividend-price ratio of a share is the company's total annual dividend payments divided by its market capitalization—or the dividend per share, divided by the price per share. It is often expressed as a percentage. Current Dividend Yield = Most Recent Full Year Dividend / Current Share Price.
- Dividend Payout ratio shows the portion of earnings distributed to stockholders. Dividend payout ratio is the fraction of net income a firm pays to its stockholders in dividends: Dividend Payout Ratio = Dividends / Net Income for the Same Period. The part of earnings not paid to investors is left for investment to provide for future earnings growth. Investors seeking high current income and limited capital growth prefer companies with a high dividend payout ratio. However, investors seeking capital growth may prefer a lower payout ratio, because capital gains are taxed at a lower rate. High growth firms in early life generally have low or zero payout ratios. As they mature, they tend to return more of the earnings back to investors.
- Market To Book ratio is used to compare a company's current market price to its book value. The calculation can be performed in two ways, but the result should be the same using either method. In the first method, the company's market capitalization can be divided by the company's total book value from its balance sheet (Market Capitalization / Total Book Value). The second method, using per-share values, is to divide the company's current share price by the book value per share, which is its book value divided by the number of outstanding shares (Share Price / Book Value Per Share). A higher market to book ratio implies that investors expect management to create more value from a given set of assets, all else equal. This ratio also gives some idea of whether an investor is paying too much for what would be left if the company went bankrupt immediately.